In article <b3d95319-a289-4abf-9786-5728364f2427[at]c2g2000pra.googlegroups.com> ,
<aynetwork-google[at]yahoo.com> wrote:
- quote -

Now suppose the original price was $10/share. There's a taxable
profit of $80/share, so the day trade which appears to make $10/share
is actually cashflow negative.

If you expected the price to drop so you'd buy it back cheaper, you're
better off selling short ("against the box") at $90/share, and closing
the short sale at $80/share. The generates only $10 in taxable income
(short-term capital gains).

Seth

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<aynetwork-google[at]yahoo.com> wrote in message
news:b3d95319-a289-4abf-9786-5728364f2427[at]c2g2000pra.googlegroups.com...
- quote -

There is no gain. Your loss of $10/share is a wash sale, so you don't get
that either.

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aynetwork-google[at]yahoo.com wrote:
- quote -

What "gain"? You have a (longterm) capital loss of (90-100)/share.

You then simply used part of the remaining initial purchase returned to
by the stock again at a lower initial basis for a subsequent sale at a
future time/price.

--


========================================= MODERATOR'S COMMENT:
Actually this loss is not allowable as it is a wash sale. See Pub
550 for how to report a wash sale.

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<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

aynetwork-google[at]yahoo.com writes:

- quote -

Ok, at that point you have a long-term capital loss of $10/sh or $1000
overall.

- quote -

That turned the previous sale into a wash sale. The $1000 loss is
disallowed and the loss and the previous position's holding period
is tacked on to the new position.

In other words, instead of having a $1000 loss and a short-term
holding of 100sh with a basis of $80/sh or $8000 overall, you
have *no* loss and a *long-term* holding of 100sh with a basis
of $90/sh or $9000 overall.

- quote -

This is reported on your Schedule D (in the long-term section)
as follows:
Description Acq Date Sale Date Proceeds Basis Gain/(Loss)
100 XYZ 10/7/2006 10/7/2008 $9000 $10000 ($1000)
WASH SALE $1000

The repurchase isn't reported until it is ultimately sold.
When it is sold, its basis is $9000 (=$8000 "raw" basis plus
the $1000 disallowed loss) and its holding period is deemed to
begin in 2006, not 2008 (because you have to add on the holding
period of the "washed out" position.

--
Rich Carreiro rlc-news[at]rlcarr.com

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I have a question about taxation of stock trading gains. Let's say I
have 100 shares with a basis of $100/share (purchased two years ago).
I sold these 100 shares at $90/share and bought back exactly 100
shares the same day at $80/share. how is this gain of 100x(90-80)=
$1000 taxed? It does not appear to be a capital gain, is it then
ordinary income?

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<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >